According to the Malaysian Automotive Association (MAA), TIV for August 2020 registered sales of 52,800 units (-8% MoM, +3% YoY). The YoY growth was driven by the SST exemption sales which started mid-June and will last up to December 2020. Whereas, the MoM drop was due to the clearing of backlog orders in July 2020 (particularly pre-Covid inventory), and short working month in August 2020 due to a few festive holidays. Sales volume for September 2020 is expected to be maintained at around August’s level. Moving forward, sales volume would depend on the carmakers’ new inventory production. 8MCY20 reported TIV of 285,045 units (-28%), forming 60% of our sales target of 475k (-21% YoY), within expectation. We believe the upcoming new volume-driven launches in 4QCY20 (i.e Proton X50, Honda City and Nissan Almera) could offset the cautious consumers’ sentiment from the ending of loan’s moratorium by 30th September 2020. Concurrently with our recent upgrade in stock calls earlier during the earnings results season (SIME and BAUTO), we upgrade our sector call to NEUTRAL (from UNDERWEIGHT).

August 2020 registered sales of 52,800 units (-8% MoM, +3% YoY). YoY growth was driven by the SST exemption sales which started mid-June, and will last up to December 2020. Whereas, the MoM drop was due to the clearance of backlog orders in July 2020 (particularly preCovid inventory), and short working month in August 2020 from a few festive holidays (Aidiladha, Awal Muharram, and Merdeka Day). Sales volume for September 2020 is expected to be maintained around August 2020 level with continuation of SST exemption sales and on-going promotional campaign. Moving forward, sales volume would depend on the carmakers new inventory production (excluding Nissan).

Taking a detailed look at the passenger vehicles segment (-9% MoM, +2% YoY), both MoM and YoY performances tracked the overall unit sales trend on the above-mentioned reasons. The strongest take-up rate YoY came from Proton, Mazda and Perodua. Proton (-14% MoM, +25% YoY) was buoyed by the all-new X70 CKD (2,791 units sold at 25% of sales), and supported by the face-lifted Proton Saga, Iriz, and Persona. Note that, Proton plans to unveil the all-new Proton X50 soon. Mazda (0% MoM, +21% YoY), showed increased delivery for face-lifted CX-5 and all-new CX-8. Perodua (-3% MoM, +13% YoY) was driven by the all-new Perodua Axia, Myvi, and Bezza, and supported by ARUZ (2,179 units sold at 10% of sales). Note that, Perodua has reached its growth limit producing up to 25k unit/month or running at 98%/99% of its plant capacity from July 2020, which will be maintained until all back-orders are fulfilled; consequently, pushing the launching of Perodua D55L to next year. On the other hand, Toyota’s (-27% MoM, +3% YoY) sales growth was contributed by the all-new Toyota Vios, Yaris, and Hilux, which comprised 76% of UMW Toyota’s sales. Note that, UMW Toyota SB announced that orders are being taken for the upcoming face-lifted Toyota Hilux with new improvement cosmetically as well as for safety and performance. The worst performance YoY came from Honda and Nissan as consumer held back on purchases, waiting for new launches. Honda (-6% MoM, - 25% YoY) sales mostly came from its top models Honda City, Civic and BR-V. Note that, Honda plans to unveil the all-new Honda City soon. Nissan (-9% MoM, -24% YoY) fared the worst due to dearth of all-new model launches. Note that, Nissan plans to unveil the allnew Nissan Almera soon, but could prove untimely with the launch of the popular Honda City.

We upgrade our sector call to NEUTRAL (from UNDERWEIGHT) with unchanged TIV target of 475k units (-21% YoY). We believe the upcoming new volume-driven launches in 4QCY20 (i.e. Proton X50, Honda City and Nissan Almera) could offset the cautious consumers’ sentiment from the ending of loan’s moratorium by 30th September 2020. Concurrently with our recent upgrade in stock calls earlier during the earnings results season (SIME and BAUTO), we upgrade our sector call to NEUTRAL (from UNDERWEIGHT) with unchanged TIV target of 475k units (-21% YoY). Note that, MAA envisaged TIV for 2020 at 470k units (-22% YoY). We believe that sales tax exemption until end-of the year may help spur sales along with better incentives program under NAP 2020, positive impact from BNM’s overnight policy rate (OPR) cut and pre-emptive measures to assist those who might be financially challenged by Covid-19 impact. Nevertheless, we remain concerned with the economic impact from the pandemic with our economic research team having the view that 2020 GDP is expected to contract by 5.9%.

Source: Kenanga Research - 22 Sept 2020